RE:CIBC Waiting for AMCO -Thanks Tobuyornot. The analyst is Prakash Dowd. Note below the average analyst target on the street is $64.40 USD (37% higher than Dowd)...GLTA 2015-12-01 07:52 ET - In the News The Globe and Mail reports in its Tuesday, Dec. 1, edition that CIBC World Markets analyst Prakash Gowd rates Concordia Healthcare "sector performer" in new coverage. The Globe's David Leeder writes in the Eye On Equities column that Mr. Gowd targets the shares at $47 (all figures U.S.). Analysts on average target the shares at $64.40. Mr. Gowd says he is waiting to see the impact of the acquisition of Amdipharm Mercury (AMCo) on Concordia. He is taking a "conservative stance for now." The analyst says: "Concordia has a deal-driven management team that is highly capable of sourcing and executing acquisitions. Since its inception three years ago, Concordia has transformed into a diverse, fully integrated global specialty pharma company with over 200 products being sold in 100 countries. AMCo is Concordia's first company acquisition, and a very large one at that. The transaction only closed on Oct. 21. Given the size of the acquisition, and that we have yet to see one quarter where AMCo is included in Concordia's financials we will wait to see how the AMCo business performs as part of Concordia, and monitor how management executes the integration and pays down debt."
Tobuyornot wrote: What's The Event
As of November 29, we are initiating coverage of Concordia Healthcare with a Sector Performer rating and a 12- to 18-month price target of US$47, which is based on a 10x multiple of 2016E EV/EBITDA.
Implications
Concordia has a deal-driven management team that is highly capable of sourcing and executing acquisitions. Since its inception three years ago, Concordia has transformed into a diverse, fully integrated global specialty pharma company with over 200 products being sold in 100 countries.
AMCo is Concordia's first company acquisition, and a very large one at that. The transaction only closed on October 21. Given the size of the acquisition, and that we have yet to see one quarter where AMCo is included in Concordia's financials, we take a conservative stance for now. We will wait to see how the AMCo business performs as part of Concordia, and monitor how management executes the integration and pays down debt. Management has guided for 2016 revenue of $1.02 billion–$1.06 billion and EBITDA of $610 million– $640 million. Our estimates are just slightly below the low end of the range.
While we see merit in the model of acquiring legacy assets, using price as a growth driver, in the future we would like to see Concordia consider more products that have expanded market opportunity based on sensitivity to promotional spend, potential for expanded indications, and possibility for greater reimbursement.
Given Concordia's highly leveraged balance sheet, its business developments efforts will be constrained, and no significant acquisitions in 2016 are expected. Instead, management will likely be focused on debt reduction to reduce its net debt/EBITDA multiple to under 5.5x.
Concordia stock will largely reflect the performance of AMCo. We will re-evaluate our position once we gain more clarity on AMCo's drug portfolio, confidence on management's ability to grow a newly acquired business that operates primarily in Europe, and comfort that AMCo can provide the growth that Concordia expects.